NStar, National Grid benefit from surge in oil-to-gas conversions

Business owners dream of landing customers for life. They also dream of times when their own costs go down while their competitors’ costs remain sky-high. This confluence of events is happening right now in the state’s natural gas industry, as the two biggest natural gas utilities in Greater Boston seek state permission for another round of rate cuts.

Consumers certainly seem to be paying attention to what’s happening with natural gas prices. When you’re a heating oil customer forking over nearly $4 a gallon, it’s hard not to pay attention if there’s another option available. Of course, this option isn’t necessarily cheap (it could cost you at least $5,000 to $6,000 in onetime expenses to replace oil heat with gas). But the utilities make it easier to switch by offering subsidies for installing a gas furnace and getting rid of an oil-fired one.

Both NStar and National Grid are enjoying a boom in heating oil-to-natural gas conversions this year. The big declines in wholesale gas prices must be playing a key role, although I suspect many new customers switch over only after their heating oil-powered unit reaches the end of its useful life.

NStar seems to be on pace for a stronger year of conversions when compared with National Grid, a much larger utility. NStar spokesman Mike Durand tells me that more than 900 NStar gas conversions have taken place this year as of Sept. 1, and the company expects nearly 2,000 conversions once the year is over (the last four months of the year represent a popular time for conversions). To put things in perspective, Boston-based NStar handled a grand total of 867 conversions in 2010. Durand says this year could be NStar’s best conversion year in more than 15 years.

National Grid also seems to be enjoying a surge in oil-to-gas conversions, albeit at a less robust growth rate than what NStar is enjoying. National Grid spokesman David Graves says the number of residential and business conversions in Massachusetts and New Hampshire during the five-month, April-August period rose 10.8 percent, to 2,958, from the same time a year ago.

Some experts will warn you that there’s no way to know which fuel will be less expensive over the long haul. But for the foreseeable future, it’s safe to say natural gas will continue to look like a relative bargain when compared with heating oil. It will be interesting to see how many people think that difference is worth the big financial investment of a new heating system. So far, it’s safe to say that natural gas is winning this popularity contest.